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Friday, July 15, 2011

GOP, Obama Medicare cuts will force hospital rationing

"Additional cuts to Medicare and Medicaid would put additional pressure on hospitals," squashing "already thin 2% to 4% operating margins," writes Janney Capital Markets analyst Joseph D. Foresi in a report to clients yesterday.

"Proposed Medicare and Medicaid cuts, $350 billion over 10 years, by House Majority Leader Eric Cantor, R-Va., this week, would be in addition to $500 billion in reduced Medicare payments as part of (Obama's) Patient Protection and Affordable Care Act," Foresi notes. Since "Medicare and Medicaid reimbursements (pay) 56% of all care provided by hospitals," the additional proposed cuts will ensure "the problem is expected to get worse going forward."

What to do? Foresi expects hospitals to impose "a value purchasing program" that would force doctors to find cheap alternative treatments, forcing market discipline on the more-is-better US health-services market and putting hospitals and doctors (rather than insurers or Congress) in the nasty position of having to say No to patients who want costly treatments.

That may be bad for hospitals, doctors, and patients as things are currently run. But change is always opportunity for someone. In this case, Foresi writes, it may be good news for healthcare consulting firms like Huron Consulting Group Inc. and Navigant Consulting, which could face "solid long term demand trends" as desperate providers seek help cutting costs so they can stay in business.
Posted by Joseph N. DiStefano @ 11:49 AM  Permalink | 3 comments
Comments   
  • 0 like this / 0 don't   •   Posted 12:01 PM, 07/15/2011
    Yet everyday all I read in the Inquirer is that another hospital is building and expanding.
    — Wilhelm Von Humboldt
  • 0 like this / 0 don't   •   Posted 12:15 PM, 07/15/2011
    Wilhelm, you're so right. As I've noted before, when you divorce who pays, from who gets paid, from who uses, the price of the good or service is guaranteed to go up extra fast. See, for example, healthcare, college, military procurement. -- To an individual hospital it makes sense to keep building. To the taxpayers and ratepayers and employers who pay the bills, it seems insane. Solution is either an all-private market system, which Americans won't tolerate because so many people would die young; or a national healthcare system, which also scares a lot of people.
    — Joe D
  • 0 like this / 0 don't   •   Posted 4:42 PM, 07/15/2011
    I've been asking that same question, Whihlem. There's a huge new hospital being built in East Norriton, Montco while there are 2 hospitals within a mile that are far under capacity. While I understand the problem that Foresi is stating, I don't buy that nothing can be done about the ever growing price and cost of health care. We've been to hospitals and health care providers. I finally started trying to see what I could do. When I go to the dentist to get my teeth cleaned, I tell them no xrays and no waste of time exam by the dentist. When I needed a blood test, I went to an independant lab. They charged less than half what the hospital charged that my doctor told me to go to. Another big cost driver that I've been seeing is cancer doctors opening their own clinics and referring patient there. You have the cost of the hospital administration there without the revenue and redundant administration at these independant centers. But, I do believe that some of these Republicans want to destroy Social Security and Medicare by starving the programs of funding. Cantor and Boehner are alumni of the Koch brother's ALEC organization.
    — MikeP


3 comments
About Joseph N. DiStefano
Joseph N. DiStefano writes this blog to feed his PhillyDeals column in the Philadelphia Inquirer. Joe has been a member of Bloomberg LP’s New York Finance Team, wrote the book “Comcasted,” taught writing at St. Joseph’s University, and studied economics and history at Penn. Reach Joe at 215-854-5194 and JoeD@phillynews.com
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